Analog devices (ADI) give you the rocket science you need to know

What happened:

Shares of analog chipmaker Analog Devices ( NASDAQ:ADI ) rose 9.1% in afternoon trading after the company reported first-quarter results that beat analysts’ EPS expectations. Revenue also exceeded expectations, even as the company flagged “ongoing macro and inventory issues.” Revenue forecasts for the next quarter were higher than Wall Street estimates. Specifically, the company expects to return to sequential quarterly revenue growth with a more stable customer base following recent inventory normalization and improved new order volume, suggesting it is emerging from the trough of a cyclical downturn in the semiconductor industry. Separately, the Board of Directors declared a quarterly cash dividend of $0.92 per share of common stock outstanding. Putting it into perspective, we believe that it was a very solid quarter that showed that the company was on track.

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What the market tells us:

Analog Devices stock is not very volatile relative to the market average and has only seen a move of more than 5% over the last year. In the context of this, today’s move indicates that the market considers this news significant, but not something that would fundamentally change its perception of the business.

The biggest move we’ve reported on over the past year came 12 months ago, when the company’s shares fell 6.2% on news of the company’s second-quarter results, which slightly beat analyst estimates for revenue and earnings per share (EPS). However, there was a lack of free cash flow and inventory levels increased. Revenue guidance for the next quarter was below consensus, with management calling for moderate revenue growth due to “continued economic uncertainty and supply chain normalization.” Overall results were weak and highlighted the company’s exposure to increasing adverse macro factors.

Since the beginning of the year, the price of Analog Devices has increased by 22.7%. Investors who bought Analog Devices stock for $1,000 5 years ago will now be looking at an investment of $2,342.

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